Figure 2. Import Distorting Policies
tariffs)
tions from import-promoting to import-retarding policies (Runge,
1990). In principle, either type of distortion can be expressed as a
tariff equivalent, with import promoting policies defined as a nega-
tive tariff. Once again, the issue is which policies are determined to
be definitely out-of-bounds (“Red Light”), which are undesirable
and to be phased out over time (“Yellow Light”) and which are ac-
ceptable (“Green Light”).
Domestic Production Distorting Policies
Finally, there are those policies affecting domestic production. As
shown in Figure 3, such policies may be negative, such as U.S. and
Figure 3. Output Distorting Policies
